Sample Disclosure – Change In Accounting Policy, Measurement Of Stage Of Completion Of Contract Work (8 December 2009)
CHANGE IN ACCOUNTING POLICY – MEASUREMENT OF STAGE OF COMPLETION FOR CONTRACT WORK
Prior to 1 July 2008, where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.
However, the Company has changed the basis of measurement from proportion of contract costs incurred for work performed to date to the estimated total contract costs to survey of work performed. The reason for the change is that the directors are of the opinion that value of work certified or surveyed as a percentage of the total contract value better reflect the contract work performed by the Company. The change in accounting policy is applied retrospectively and there was no effect on the balance sheet items of the Company as at 30 June 2009 and the income statement of the Company for the financial year then ended.